My New Trading Software
I started using this program called MultiCharts
It’s very cool!
Here’s a little info from their website:
MultiCharts is an trading platform. MultiCharts has features that can help you achieve your trading goals. Charting and built-in indicators that allow you to build your own strategies, trading is also possible from chart. Backtesting, automated execution and support for EasyLanguage scripts is also available for traders who are used to using trade station. I really like the program because it gives me the ability to customize everything just like if I was using tradestation which I don’t use anymore for the reasons I set out below.
It’s very similar to TradeStation but without the monthly cost and I don’t have to trade with tradestation to be able to use this program. One thing I don’t like about tradestation is I have to use their brokerage platform and trade with them and I can’t separate the two.
Multicharts let’s you analyze charts and trade from any platform you like and I don’t feel like I have to be tied up with a particular broker.
How To Swing Trade Gaps
One technique I like to use for trading stocks and commodities is the Opening range breakout. This strategy was discussed on a site I use as my reference. From my limited understanding, the only way this method works well is if the market is range bound in a choppy back and forth pattern. I suggest for further reading on the topic you check out the article about how to trade swing trading strategies correctly. There are other articles that discuss how to day trade and swing trade stocks using the opening gap and remember if you need a good source of information on technical analysis, check out this article about technical analysis for detailed explanations.
The basics of an opening range breakout is you must obviously have a real gap and the wider the gap the better. The gap must occur during the first half hour of the trading day and no later. I’m specifically talking about a gaps from the previous nights close. If the gap doesn’t begin to fill during the first half hour the trade is not valid any more.
What you want to make certain when you are trading gaps is to use other indicators that determine if markets are oversold or overbought. You have to remember that you are going to be trading counter to the trend. Because the markets typically end up following the trend the gap trade is unusually risky. However, markets are prone to false breakouts much more than for breakouts to be real. In other words there is a higher likely hood of a breakout going against you then in the direction of the trend. This is where the odds begin to come to your favor as long as your stop loss is placed to protect your risk properly.
Remember, any trade that is moving counter to the trend has a very high risk of turning right back around and following the trend again. You want to make sure that when you are trading gaps you have a stop loss that’s equal to your potential profit factor times two.
If the trade has a smaller profit factor than the risk profile, the trade is usually not worth taking and remember that when you are trading strategies that involve swing trading you have to watch your risk level very carefully.
One other important detail that I don’t want to forget is the fact that you must always no matter what place your stop loss at the time you enter the trade. If you do not place a stop loss order at the same time the odds are you are going to forget or avoid doing so when the time comes to liquidate the trade. By having a valid stop loss order in place, you avoid most unforeseen risk that the position could cause.
Also, try to choose markets that show a wide range of volatility but not too much trend for example the bonds futures market is ideal for this type of set up. Also remember that to check out this article at Market Geeks about swing trading strategies.
The Only Indicator That I Rely On For Day Trading
Over the years I’ve spent many thousands of dollars looking for a different day trading strategies and tools to help me trade better. After trying out every possible indicator under the sun, I finally figured out that the best indicator for day trading is the indicator that you are mostly comfortable trading with.
Most of the trading is a mind game that occurs not in the markets but inside our head. The markets are always moving up and down and no one really knows where they will go next. But one thing we do have control over is how we react to the day to day market movement.
When I day trade different strategies I always keep an eye on the risk but I found out that risk that you get on paper and risk that you get in real life under real market conditions is entirely different from one another.
First you have slippage, this one factor is something most testing parameters don’t take into account. Another major issue with slippage is that you have to add it to your commission so it does add up over time. This means if you are scalping you don’t want to be make 10 bucks per trade on paper, if you do the slippage and commission will eat it up.
Make sure your day trading strategy has some profit factor involved so that your winners will be large enough to withstand your commission, slippage and the remainder that should be a reasonable sum. Because you have to cover your losses as well and that’s why winners need to be substantially larger than your losers. Unless your percentage of profitability is unusually high.
Another important indicator I want to talk about is price and time analysis. This is not Gann or Elliot wave analysis but practical time analysis so that you know what time of day volatility rises and what time of day volatility moves down.
Once your timing is determined you have to focus on entry and how many times daily you will enter the trade. I don’t think anyone should be chasing the market all day so two or three maximum executions per day should be sufficient.
I don’t understand traders who sit there and execute trades all day long while risking their account to make very little on each trade. I can understand floor traders doing that but off the floor I just don’t see any point in it.
So remember, the best indicator is one that you feel comfortable with and you like to use. Don’t let anyone tell you that your indicator does not work or work well. Because in theory trading is a psychology game and you have to remember that no matter what.
If you like this article there’s a few more good articles that you can read at market geeks about day trading different strategies. It’s a good site that I like to share with my readers.
Using Profit Targets to Lock In Profits
I wanted to write about an interesting trading concept that I just learned about from reading an article about swing trading stock strategies at one of my favorite sites. I originally heard about this concept on http://www.investopedia.com/terms/p/profit-target.asp but Market Geeks expanded on the idea a bit more. I will write here what I learned and hopefully when I come back to this in a few months I will have something I can use as an example. Ultimately, I want this to be a trading journal that I can look back on and see how much I’ve improved on my trading in the time I’ve actually been trading.
Here’s a great way for me to practice profit targets: I first apply an ATR indicator which stands for Average True Range. I change the settings from 14 days to 5 days. This way I get a much better idea of the current level of volatility compared to the volatility levels of the past. This is what happens when you use a 14 day ATR filter, there’s just too much past data and not enough present volatility. Now that we set it to 5 days, we have to multiply the 5 day volatility and then add the volatility to our entry price. This way we know exactly how much or how far the profit target is placed away from our entry price. We can also calculate risk and see if the trade is worth the different risk to reward between the two.
If I’m taking short positions, I would subtract the ATR from my entry price. Make sure you don’t confuse the two different concepts because I’ve seen it happen a few times.
Just check the first 5 bars of the trading day’s and measure the ATR for those 5 bars. Use 5 minute bars so you have the range in the first 25 minutes of the trading day. This way you can add the difference or the ATR to your entry assuming your going long and subtract it from your entry if you’re going short.
Check out more articles about swing trader strategies at Market Geeks.
What I encourage traders to do is take it slowly and day trade using ATR on paper before committing any money to the idea. The markets are very intimidating when money is on the line so learn what you need to do when emotions are not involved.
One other very important thing I almost for was, never forget to place your limit order when placing profit target orders. Don’t use market orders unless the liquidity is very high and volume is low. This doesn’t usually happen because volume generally high and liquidity is high and the same time.
Be careful out there!!
Great Swing Trading Strategy Explained
One terrific day trading strategy that I like to use is the opening range breakout. This is one of the classic trading strategies for day trading that’s been around for many years. I remember first hearing about this strategy after reading a how to be a successful trader book written by no other than Larry Williams.
Many traders don’t like to trade breakouts because volatility is involved with most breakouts while pullbacks as they are called do not produce as much volatility and as a result produce lot’s less slippage. But you have to be the judge based on the type of market you’re trading and the type of trend you see.
One thing about breakouts is they don’t work well when markets are quiet and range bound. If you see markets that are barely moving or markets during the holiday’s season I highly recommend you do not initiate breakout trades.
On the contrary the best type of strategy to swing trade or day trade is false breakouts. I hear the odds of a breakout being unsuccessful is much higher than a breakout that continues moving. I hear the odds of breakouts moving against you are close to 70%. So anyone who trades breakouts should consider fading the breakout especially after the first hour of the day when stock had a chance to begin showing direction one way or another.
One thing to keep in mind when you’re swing trading different strategies is to make sure you keep track of all the stop loss levels and don’t confuse one strategy for the other one. I’ve seen traders who keep track of 10 different positions in their head and when they confuse one position for the other it messes up the entire sequence of the trades and really pulls them away from the concentration that’s necessary to become profitable and stay profitable in these market environments.
On a parting note, I want to thank my mentor John Freidman for helping me become a consistent trader. Without him I would not be wring this. I know now that the secret to becoming successful is inside of me and no system or method that I buy can make me profitable.
As long as I remember this I will continue using the same system that I’ve used over the last few years and whether I’m losing or winning I will continue to follow my rules. The only time I ever break my rules is if markets are doing something completely unforeseeable and that doesn’t happen that much.
I’m going to a conference this weekend were I get to learn how to program Multicharts and use easy language. I’ve very excited about that and will report back. I can’t wait to back test my strategies and find the perfect set ups without having to spend all day long looking at the charts. My cousin told me he saves about 2 hours each week by using program to help do the busy work for you. I will be off next week so I will have more time to update this blog.